Existing Homes - The Next Wave

The existing housing stock is where action must be taken to manage energy use and carbon emissions. Buildings represent 43% of carbon emissions in the United States and provide an actionable and cost-effective carbon mitigation strategy. Existing homes represent the largest carbon reduction potential because over 70% were built before energy codes were enacted and even the newer homes have major energy savings opportunities.

Opportunity

Recent legislative and regulatory initiatives on federal, state, and local levels have combined to create an unprecedented opportunity to green existing homes in the United States The following initiatives are reshaping the future of the built environment.

The federal economic stimulus package includes $6.3 billion energy-specific funding to local governments and states, $5 billion for weatherization, and $500 million for green workforce training

Aggressive state and local government CO2 reduction goals and emerging Climate Action Plans

New innovative land-secured financing districts for energy efficiency and solar loan programs; passed in California and Colorado with legislation pending in 10 additional states

These initiatives have the potential to create community-scale comprehensive retrofit and solar programs that generate thousands of long term new jobs while maximizing quantified energy, water, and carbon reductions.

Today’s homes will dominate for decades. Comprehensive home retrofit and solar programs are emerging as the centerpiece of local government Climate Action Plans.

With collaboration among local jurisdictions, voluntary financing districts can be formed to provide affordable financing for solar and efficiency upgrades. Finance districts allow property owners to make energy efficiency upgrades and install solar systems with little or no upfront cost.

The upfront costs are paid through the issuance of revenue bonds. The bonds are repaid from a line item on participating home-owners’ property tax bills over 20 years. Participating property owners pay for only the costs of their energy project. The program is 100% “opt-in” and property tax expenses remain unchanged for those who choose not to participate.

In addition, utility programs that train contractors for comprehensive home upgrades can be expanded with new workforce development grants. Robust public education and outreach campaigns can drive consumer participation. We need only to combine these elements into a new model.

Challenges

Utilities have a long history of directing energy efficiency programs at the existing building sector with differing results due to regulatory constraints, high costs, and the complexities of reaching a fragmented market. Financing has not been readily available for substantial market penetration and optimized results. The workforce is mostly untrained in proper procedures, and training has been too small in scale and often impractical. There are many related efficiency programs for low income, open-market housing, and non-residential buildings, but they are uncoordinated and have very different and conflicting requirements and processes. But recent governmental actions are changing the picture.

Why focus on existing homes?

The 120 million existing housing units in the United States represent 21% of all carbon emissions. Focusing on energy efficiency improvements in these homes provides an optimal carbon mitigation strategy. Over 70% of those housing units were built before energy codes were enacted and the remainder still have major energy savings opportunities. Today’s homes will dominate for decades. Comprehensive home retrofit and solar programs are emerging as the centerpiece of local government Climate Action Plans because it is easier, faster, and more cost-effective to achieve carbon reductions in buildings than decreasing energy used for transportation or increasing utility-scale renewable generation (see Figure 1).

Finally, with the financial services and housing industries in freefall and the glut of homes on the market, new construction will play an even smaller role than it has in the past. However, with $500 million in green jobs training in the stimulus bill becoming available, these displaced construction workers are the ideal candidates to get trained in energy efficiency and solar installation. The existing housing stock is where action must be taken to manage energy use and carbon emissions.

Role of Government

Local and state governments are on the front lines in tackling climate change. At a time when deficits have never felt so daunting, governments at all levels are either staking their claim as green champions or are being pushed forward by the threat of lawsuits. Due to their control over local land use and direct relationship with building owners through issuance of building permits and property taxes, local governments have an important role to play. However, there are significant barriers and challenges to successfully transforming existing homes. These include:

Policy There is a lack of effective state and local government retrofit-triggering mechanisms and incentives that can influence the performance of the existing housing stock. In addition, existing regulatory barriers such as limited cost-effectiveness definition do not recognize all consumer and societal benefits. The result is an inefficient emphasis on individual retrofit measures instead of a comprehensive “whole house” approach that can deliver much greater energy savings, health and comfort benefits, and much higher consumer satisfaction.

Technical Difficulties The existing housing stock is extremely fragmented and often requires complex and costly comprehensive solutions. A scalable program model is difficult to achieve because homes have different deficiencies based on factors such as vintage/age, building type, location, climate zone, modifications made, energy usage patterns, and energy bills.

Consumer Barriers Aside from consumers’ knowledge of savings on utility bills, there is widespread lack of awareness of the additional benefits associated with green retrofits such as comfort, improved indoor air quality, and reduced home maintenance costs.

Financing Low-cost financing has not been widely available for green retrofits and is tied to the homeowner rather than the property. Conventional financial instruments are not in step with loan payback timeframe due to society’s high mobility (average resident moves every eight years).

Workforce Infrastructure Significant gaps in knowledge, skills, and experience in the workforce limit scale and success of green retrofit programs.

Delivery Mechanisms Fragmented program design and implementation due to lack of coordination between existing low, moderate, and upper income programs and initiatives—now funded primarily by utility incentive programs—result in missed opportunities to leverage all available resources and maximize benefits.

Research Limitations Lack of adequate research data (characterization of built environment and associated social environment, costs versus benefit studies, and so on) to analyze market demand, which is essential to inform successful program design and implementation strategies.

To overcome these barriers and achieve the aggressive greenhouse gas, energy, and water goals already in place, we will need to develop and adopt new comprehensive and integrated program models that account for the realities of the physical infrastructure, leverage government policy, build business capacity, and raise consumer awareness.

The Proposed Program

Land-secured finance districts are the centerpiece of the program because they remove the high first-cost barrier by providing low-interest long-term financing to homeowners via annual property tax payments that transfer with the building when sold. However, in order to ensure significant market penetration and program success several supporting program elements are required. These include consistent and credible program standards for energy efficiency with clear verification protocols, training to ensure a robust and capable workforce, an effective marketing and outreach strategy offering bundled incentives to attain high participation, and a strict quality assurance program to protect consumers and reduce local government liability. In addition, ongoing tracking, measurement, and reporting are required to ensure program effectiveness and to quantify energy, water, and carbon reduction benefits. Third party implementers will coordinate all program elements to provide an integrated delivery model that relieves local governments of technical and administrative responsibilities (see Figure 2).

These strategies, if sequenced and coordinated correctly, will create the opportunities necessary to achieve the deep energy and water reductions needed, while helping to pull the U.S. economy out of recession and usher in a new chapter of prosperity.

Brian Gittis a Principal at BKi, a leading energy efficiency and green building consulting firm in Oakland, California. Brian is actively working with local governments, utilities, state agencies, and other building industry stakeholders to develop comprehensive community-scale retrofit and solar programs. You can contact him directly at brian@bki.com.

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